When (not if) this becomes a major issue in 2008…

Which US presidential candidate will be the first to stake out a common-sense, commercially intelligent, free-markets-based position on intellectual property rights and privacy in the campaign for 2008?

Which Fortune 100 CEO(s) will be the first to endorse these policies and get on the right side of their customers?

And how long will the great American Joe and Jill Public sit back and let the narrow and short-sighted lobbyists, jurists and legislators entrench an (artificial) 19th century paradigm on the 21st century knowledge-based economy?

Well I don’t know the answers to these three questions but if I had to take a guess I would say:

1) Obama ? Bloomberg ?

2) Jeff Immelt? Thing is, the answer should be all of them: how many business school case studies and courses does it take to drive home the fundamental tenet of business which is treat your customers with respect??? And once, just once I’d like to see a leading US CEO come out in favour of truly free and competitive markets (not the gummed up, carved up, oligopolies that too often pass for markets these days…) Why Jeff? Well he seems like a strong leader and one that genuinely has a long term view, and as head of GE can get away with saying and doing what he thinks is right. It would be nice if he had a talk to the folks who work for him at NBC…

(3) I hope my optimism on this front isn’t just naivete…but I suspect most people are very close to the tipping point and will get increasingly angry and vocal in the fight against stupidity.

So what am I talking about? Dumb DRM and dumb business models. (Via Bill St. Arnaud) Mark Gibbs at NetworkWorld asks us to “Forget Big Brother” and “Watch out for Big Entertainment”:

Last week I discussed the doublethink and newspeak of “the Campaign to Protect America,” an initiative launched by the Coalition Against Counterfeiting and Piracy as well as the shameful strong-arm bullying tactics of the Recording Industry Association of America.

My big concern about this coalition is that it isn’t just about Big Entertainment trying to stop “piracy”, it also includes the National Association of Manufacturers and Big Pharma on the pretext of addressing the problems of counterfeiting.

As I suggested at the end of last week’s rant, the CACP ploy could be very bad news for us all because its goal will be to extend the law into all sorts of areas where we really don’t want it and I threatened that this week I’d look at what it might be able to do.

Here’s the worst case scenario: Consumer PCs would, by law, be directly monitored by ISPs to ensure compliance, and the legal consequences for any attempt to circumvent mointoring would make the punishment for murder look like a slap on the wrist.

He goes on to tell us of how the friendly folks at NBC are thinking about things:

Remember Rick Cotton, NBC/Universal general counsel, who I mentioned last week? A couple of weeks ago he actually suggested that ISPs spend more of their time spying on users and then added that the law be changed to remove the Safe Harbor provisions that protect ISPs when their customers have pirated materials! According to several sources, Cotton would like to see ISPs forced to use “readily available means to prevent the use of their broadband capacity to transfer pirated content.”

Wow.

Clearly regular readers will know that I am not some woolly dreamer who doesn’t believe in making money or getting paid for ‘brain-based’ services. On the contrary my livelihood depends on being paid for ‘brain-created’ value. But I also realize that business models and ecosystems evolve and so what worked or more importantly still – what was appropriate – 20 years ago is unlikely to work today, and will almost certainly not work a decade from now. It seems to me self evident that the underlying ‘asset’ in the entertainment industry – talent in the jargon – remains as valuable, probably moreso than it ever was. I have no hesitation in believing that talented entertainers will continue to thrive financially and otherwise in the future including (and most likely) operating in an entirely different business paradigm to that which existed in the second half of the 20th century. I’m not an expert, but even I can see a few possible outcomes and business models that might work extremely well for the artists and their customers (the audience…) – think ‘because of’ rather than ‘with’ (to steal a great line out of Doc & JP‘s books…) I mean even the Economist has figured it out:

The shift away from recorded music is due in part to the recognition that touring and merchandise are more lucrative. But it may also be a consequence of internet piracy, as free downloads give music fans more money to spend on other things. Jwana Godinho, the director of Música no Coração, a concert promoter in Lisbon, thinks many music lovers have a “mental budget” that they are prepared to spend on music, and have switched their spending from CDs to tickets and merchandise.

The logical conclusion is for artists to give away their music as a promotional tool. Some are doing just that. This week Prince announced that his new album, “Planet Earth”, will be given away in Britain for free with the Mail on Sunday, a national newspaper, on July 15th. (For years Prince has made far more money from live performances than from album sales; he was the industry’s top earner in 2004.) Outraged British music retailers were quick to condemn the idea. As far as the record industry is concerned, it is madness. But for the music industry, it could well be the shape of things to come.

Which reminds me of this fantastic quote (the epitome of leadership in crisis don’t you think?) picked up via pmarca:

UK’s Entertainment Retailers Association co-chairman Paul Quirk, who apparently doubles as a mafia boss, defending a doomed distribution network (retail CD stores) from a doomed medium (Prince’s new CD) being bundled with another doomed medium (the Sunday print edition of the UK newspaper The Mail):

“It would be an insult to all those record stores who have supported Prince throughout his career. It would be yet another example of the damaging covermount culture which is destroying any perception of value around recorded music. The Artist Formerly Known as Prince should know that with behaviour like this he will soon be the Artist Formerly Available in Record Stores. And I say that to all the other artists who may be tempted to dally with the Mail on Sunday.”

The problem is not how the artists make a living. The problem is how do the intermediaries that have been successful in this industry over the last 50 years continue to make a living. They are the ones having an awfully hard time seeing how they can continue to be successful with the same business model (and a truckload of extra lawyers) over the next 50 years. Only problem is…they are looking for something that will NEVER HAPPEN. Ummm…let me see, how can I put it… IT’S OVER! FINITO. HASTA LA VISTA. Hmmm…probably not clear enough but…

They can’t make money from their old business paradigm going forward. It won’t work. I’m not suggesting they should be doing cartwheels or that they shouldn’t be worried, or scared or even a bit angry…even denial is a normal emotional response to loss. Yes it sucks (for them.) However…no amount of denial or anger or – yes ultimately even lawyers – is going to put this genie back in the bottle, and so rather than beating up paying customers you would have to think that there is an unbelievable opportunity for some of the smartest people and firms in this business to get a jump on all the others and become part of inventing the next business paradigm for music and visual arts. Remember my contention is that the existing business model is bankrupt, not that no useful, customer-friendly and profitable business model (needing of course lots of talented people to make it work) exists. An important distinction, at least in my book.

And why I was so sad to see last.fm absorbed into the maw of CBS (even if I can totally understand why the founders and investors might have taken this particular nickel…) and why I can only hope it turns into a sort of reverse take-over in the end. (I’m thinking of a music industry version of O’Connor into SBC into UBS…)

Markets. Talent. Intermediaries. Broking. Distribution. Customers. Disruption driven by technological and cultural change can happen in any industry where these elements exist.

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